Games in product form for demand response modelling

Energy systems are changing rapidly. More and more, energy production is becoming decentralized, highly variable and intermittent (solar, wind), while demand is diversifying (electric vehicles). As a result, balancing supply and demand is becoming more complex, making the adjustment of demand an interesting tool. Demand response (DR) is a typical leader-follower problem: a consumer (follower) adjusts his energy consumption based on the prices (or any other incentive) set by the supplier (leader). The authors propose a versatile and modular framework to address any leader-follower problem, focusing on the handling of often overlooked informational issues. First, they introduce a model that defines the rules of the game (W-model): agents are decision-makers and nature encapsulates everything beyond their control, such as private knowledge and exogenous factors. Following the so-called Witsenhausen intrinsic model, they present an efficient way to represent – on a product set, equipped with a product $σ$-algebra – the information available to agents when making decisions. Next, they introduce Games in Product Form (W-games) by equipping each player (a group of agents) with preferences (objective function and belief) over different outcomes. Thereby, they incorporate an additional layer of information, the characteristics of the preferences linked to players, which affects the possible definitions of an equilibrium. They make this explicit in Nash and Stackelberg equilibria. Equipped with this framework, they reformulate several papers on DR, highlighting overlooked informational issues. They also provide an application based on the Thailand DR program.